John Hancock Mut. Life Ins. Co. v. Haworth

• Decision Date: 16 March 1948
• Docket Number: 7400
• Citation: 191 P.2d 359,68 Idaho 185
• Parties: JOHN HANCOCK MUT. LIFE INS. CO. v. HAWORTH, Tax Commissioner, et al
• Court: Idaho Supreme Court

191 P.2d 359

68 Idaho 185

JOHN HANCOCK MUT. LIFE INS. CO. v. HAWORTH, Tax Commissioner, et al

No. 7400

Supreme Court of Idaho

March 16, 1948

Appeal from District Court, Third District, Ada County; Charles E Winstead, Judge.

Affirmed.

Robert E. Smylie, Atty. Gen., and J. R. Smead, Asst. Atty. Gen., for appellants.

The former Section 61-2436 provided for an income tax on life insurance companies, as that term is used at law and well understood. Section 61-2436, I.C.A.

The 1933 Act referred such companies to the new tax therein created on corporations, which is not an income, but an excise, tax, on the privilege of doing business in Idaho. Ll. 1933, Ch. 159, Secs. 11 and 14.

A tax levied on the privilege of carrying on business in a given jurisdiction is an excise tax and is not an income tax. 51 Am.Jur., Taxation, Sections 33, 811.

All such taxes are excise on the franchise to do business, for the privilege of doing such business in the state particularly in the case of a foreign corporation. Southern Building & Loan Ass'n v. Norman, 98 Ky 294, 32 S.W. 952, 31 L.R.A. 41, 56 Am.St.Rep. 367; Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 136 N.E. 375, 27 A.L.R. 1131.

And such a tax is not an "income tax", nor yet a tax on the "franchise" to be a corporation. Commissioner of Corporations and Taxation v. Ford Manufacturing Co., 308 Mass. 558, 33 N.E.2d 318, 322; 27 Am.Jur., Income Taxes, Sec. 6; 30 Am.Jur., Internal Revenue, Sec. 55.

Income figures in the substituted law merely as the basis of tax computation. Ll. 1933, Sec. 11, Par. 2.

The established rules of construction and application should be followed in determining the intent and effect of the 1933 amendments and new enactments.

1. An amendment of an existing statute definitely indicates an intent to change the former effect of such statute. Dist. No. 1 v. Rural High School District 58, 34 Idaho 222, 200 P. 138; United Pacific Ins. Co. v. Bakes, 57 Idaho 537, 67 P.2d 1024; State v. Bunting Tractor Co., 58 Idaho 617, 624, 77 P.2d 464.

2. When the language of a statute is changed it is presumed that the new statute was intended by the legislature to have a different meaning and therefore a different effect than formerly accorded it, and it is the duty of the court to give effect to such legislative intent. United Pacific Ins. Co. v. Bakes, 57 Idaho 537, 67 P.2d 1024; Anderson v. Rayner, 60 Idaho 706, 96 P.2d 244.

3. The Courts "should consider the former statute, the remedy sought by the amendment, and the amendment itself." City of Portland v. Pratt, 153 Or. 57, 55 P.2d 799.

4. Where the language of a statute has been changed, it is presumed that the legislative intent was to change the law as it formerly existed, not merely to interpret the existing law. Gallichotte v. Cal. Mut. Building & Loan Ass'n, 23 Cal.App.2d 570, 74 P.2d 73, 74 P.2d 535.

5. It is presumed that the legislature intended to change the existing law and courts will give such effect to the amended statute. Equitable Life Assurance Society v. Thulemeyer, 49 Wyo. 63, 52 P.2d 1223, 1234, 54 P.2d 896.

Ray E. Durham, of Lewiston, for respondent.

A life insurance company is not an ordinary corporation. It is not authorized to engage in general business enterprises. It cannot buy and sell real property for a profit. Its investments are restricted. Its rights to hold property are likewise restricted. Sections 40-602 to 40-606, incl., I.C.A.

The privilege of doing business in this state by an insurance company is taxed under Ch. 8, Title 40 I.C.A. (a) A 3% tax on the gross premiums received by a life insurance company is imposed. Sec. 40-804 I.C.A. (b) This tax on premiums is in lieu of all other taxes upon premiums. Sec. 40-806 I.C.A.

Section 61-2437 I.C.A., being a particular statute defining the gross income of a particular class of taxpayers, will prevail over the general statute defining gross income. Oregon Short Line R. Co. v. Minidoka Co. School Dist., 28 Idaho 214, at page 218, 153 P. 424; State v. Jones, 34 Idaho 83, at page 86, 199 P. 645; State v. Taylor, 58 Idaho 656, at page 667, 78 P.2d 125; In Re Wilson's Estate, 102 Mont. 178, 56 P.2d 733, at page 737, 105 A.L.R. 367; 50 Am.Jur., Sec. 561, at page 562.

Section 61-2437 by defining gross income as including only income from interest, dividends and rents excluded income from capital gain found in the general statute. Peck v. State, 63 Idaho 375, at page 380, 120 P.2d 820; Poston v. Hollar, 64 Idaho 322, at page 330, 132 P.2d 142; Meader v. Unemp. Comp. Div., 64 Idaho 716, at page 722, 136 P.2d 984; Pfister v. Johnson, 173 Okl. 541, 49 P. 2d 174, at page 177, 102 A.L.R. 31; Girard v. Defenbach, 61 Idaho 702, 106 P.2d 1010.

Budge, Justice. Givens, C. J., and Miller and Hyatt, JJ., concur. Holden, J., sat at the hearing but did not participate in the decision.

OPINION

Budge, Justice.

This is an appeal from a declaratory judgment. Respondent, Insurance Company, was plaintiff in the court below. The present state officers were substituted in place of those who had been such when the action was commenced. There is involved approximately $ 20,000 which is claimed by the State as unpaid income tax due from respondent to the State for the years 1943 and 1944.

Briefly stated, respondent is a foreign life insurance company authorized to do business in Idaho. Considerable real property was acquired by it, due to the foreclosure of mortgages securing loans made in various parts of the state. In 1943 and 1944 part of such real estate was sold netting the company a profit upon which it is contended respondent owes an income tax, together with interest thereon.

The Company contends that the whole question of its liability is controlled by sec. 61-2437, I.C.A., which reads as follows:

"61-2437. Life insurance companies -- Gross income defined -- * * * a. In the case of a life insurance company the term 'gross income' means the gross amount of income received during the taxable year from interest, dividends, and rents arising within the state of Idaho. * * *" which statute relieves it of any income tax liability other than from interest, dividends, and rents arising within the state.

Appellants contend that the 1933 amendments to the Property Relief Act of 1931, which included substitutions in certain instances of entirely new and different statutes than originally contained in said act, changed the status of such companies as respondent, and has made them liable in case of income derived from dealings in, and sales of, real property owned by them within the state. Appellants further contend that said Property Relief Act as it now exists, and has existed since 1933, imposes not an income tax, but an excise or privilege tax upon life insurance companies as well as other corporations.

We are not in accord with appellants' contention that the tax sought to be imposed against respondent is an excise or privilege tax exacted for the privilege of doing business in this state. An examination of the following legislative enactments designates the various acts as "income tax" acts: The title to Chap. 2, Sess. Laws 1931 (Ex. Sess.) reads, in part, as follows: "Providing for the levying and collecting of an income tax." Chap. 159, Sess. Laws 1933, amending numerous sections of Title 61, Chap. 24, I.C.A., after enumerating said sections of the code, reads, in part: "Relative to the levy and collection of an income tax." Section 40-804, I.C.A., as amended (Chap. 168, Sess. Laws, 1933), provides for the payment by life insurance companies of a 3% tax on all gross premiums, less certain deductions, and sec. 40-806, I.C.A., provides that the payment of said 3% tax be made within thirty days after the filing of the required statement, and when so paid "shall be in lieu of all other taxes upon premiums and upon the personal property of such companies and the shares of stock or assets thereof." This excise tax constitutes what is commonly called a privilege tax imposed for doing business in this state as a life insurance company. This is not the tax sought to be recovered in this action.

If we understand the pleadings, and particularly the cross-complaint filed by appellants and upon which it seeks a declaratory judgment, it is an action for the recovery of an income tax on profits derived from the sale of real estate owned and sold by respondent in the State of Idaho in the years 1943 and 1944. In the prayer of the cross-complaint it is alleged: "Wherefore, plaintiff prays that this Honorable Court make and enter its declaratory judgment adjudging that under the Income Tax Laws of the State of Idaho relating to life insurance companies" respondent is indebted to the State of Idaho for delinquent income tax, plus interest, on real estate profits derived from the sale of real estate by respondent in the State of Idaho during the years of 1943 and 1944, as hereinbefore stated.

A life insurance company is not an ordinary corporation. Section 61-2435, I.C.A., in the income tax law, defines a life insurance company as one "engaged in the business of issuing life insurance and annuity contracts." A life insurance company is not authorized to engage in general business enterprises, it is restricted in its activities and business. This is manifested by the provisions of Title 40 Chap. 6, I.C.A. Section 40-602 limits the manner in which its funds can be invested; sec. 40-603 provides that even foreign insurance companies are restricted in the same manner as domestic insurance companies; sec. 40-604 further restricts the type of investments; sec. 40-606 imposes restrictions on the corporation's right to hold real estate. If it acquires land through foreclosure or in satisfaction of money it has loaned, it must dispose of...